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Unknowns at OfficeMax

OfficeMax keeps mum on the specifics behind a big earnings revision.

The problem with certain kinds of problems is that you don't know how big the problem might get. To paraphrase our defense secretary: There are things you know you don't know: known unknowns. And then there are unknown things you don't know that you don't know. Unknown unknowns, if you will.

(Whoa. Sooo dizzy... )

While everyone else made fun of Mr. Rumsfeld when he explained this, I knew exactly what he was talking about. In investing, it's the unknown unknowns that really clobber you, because, more often than not, the known unknowns are already priced into a stock.

That's why the scant drop in the stock of OfficeMax(NYSE:OMX) this morning is so interesting. Under normal circumstances, a big charge that completely erases an already thin first-quarter profit would send a stock reeling. But not so for OfficeMax today. The former timber baron (Boise Cascade) turned Staples(NASDAQ:SPLS) wanna-be announced that it was setting aside $9.8 million as a legal reserve to deal with an unspecified dispute. That will turn the just-reported profit of $0.02 per share into negative-$0.07 a stub.

But what? Inquiring minds will just have to guess. A glance at the ever-fascinating "legal proceedings" section of the 10-K suggests that the trouble could be from issues relating to claims under a hazardous-substances statute known as the Comprehensive Environmental Response, Compensation, and Liability Act, or from one of several unnamed asbestos-related claims.

So, the question remains: Known unknown, or unknown unknown? Is this the end of the unspecified legal fracas? How deep does the rabbit hole go? And why would investors trust their bucks to a company that continues to keep a lid on key information while trying to recover from an accounting scandal?